7 Reasons Why You Might Consider Allocating At Least 5% Of Your Portfolio To Art

If you’re not allocating at least 5% of your portfolio to art, you could be making a big financial mistake, according to the art investment platform Masterworks.  

Art is an exciting alternative to the shaky stock market because it has the potential to improve the performance and stability of your portfolio. Contemporary art prices have outpaced the S&P 500 by more than two to one since 1996, and art's low correlation to the stocks could help investors smooth out returns during periods of high volatility.

That’s why 85% of wealth advisors surveyed by Deloitte1 are planning on recommending art to their clients and why 61% of high net worth collectors allocate 5%-30% of their wealth into art, according to UBS2.

Here are 7 reasons why you should consider allocating a portion of your portfolio to art at Masterworks:

Reason 1: Art prices have outpaced the alternatives for decades

Source: Masterworks

Art prices have outpaced the S&P 500 by 133% over the last 26 years, and they even outpaced the tech-heavy Nasdaq by 77% over the same period.

When it comes to real assets, art easily outpaced both real estate and gold.

Reason 2: Art has a low correlation to equities

Source: Masterworks

You can only truly diversify when there’s a low correlation between assets. Luckily, art has one of the lowest correlations to stocks at a -.08. This means art prices can still go up even when stocks crash.  

Reason 3: Art is a good hedge against inflation

Contemporary art averages 13.5% in annual price appreciation when inflation is above 3%, like it is now. That’s nearly four times better than gold and two times better than stocks.

Reason 4: Art is a passive, long-term investment

Large auctions only happen a few times a year and private sales often go unreported. This means investors don’t have to constantly monitor earnings reports or wonder how the next Fed meeting will impact the markets.      

Reason 5: Investing in art is easy, thanks to Masterworks

This $1.7 trillion asset class has been the exclusive domain of the ultra-rich for centuries, but that’s all changed thanks to Masterworks. 

Masterworks makes it easy to invest in iconic pieces or art from artists like Banksy and Picasso, through their industry-leading art investing platform.  

Reason 6: Masterworks has assembled an industry leading team

Masterworks has recruited a team of industry-leading experts, led by a Harvard data scientist and a former buyer from Christies. They use their proprietary database to find the artists markets with the most momentum

Less than 3% of paintings pass their strict criteria, which means you don’t have to spend months or years studying the art markets.

Reason 7: Masterworks has assembled an impressive track record of returns

Since 2019, Masterworks reports completing 13 exits on their artwork, all of them profitable, with the last three delivering net annualized returns of 35%, 4.1% and 325%.

All in all, they have sold over $45 million in artwork and distributed the profits to investors.

With over 675,000 members and over $700 million in assets, Masterworks is looking to quickly become a worldwide leader in the world of alternative investing.

They’re inviting readers to open a free, no-obligation account. From there, readers can talk with an advisor to determine what allocation in art is right for them.

​​See important Regulation A disclosures at masterworks.io/cd

¹https://www2.deloitte.com/lu/en/pages/art-finance/articles/technology-trends-new-generation-collectors-art-finance-market.html

²https://d2u3kfwd92fzu7.cloudfront.net/Art%20Market%202022.pdf

 

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This content contains sponsored advertising content and is for informational purposes only and not intended to be investing advice.